Should lower-tier private labels avoid being ‘ethical’?

Discussion
May 02, 2016
Tom Ryan

A university study finds lower-tier private label brands don’t gain much benefit from ethical positioning in the form of a consumer’s willingness to pay more. Indeed, such a strategy can backfire against economy brands.

The study from Concordia University in Montreal published in the Journal of Retailing found that, for premium private label brands as well as national brands, consumers expect to pay more for products with ethical attributes, including claims of being environmentally friendly, sustainably sourced or fair trade.

As such, ethical attributes represent a “win-win-win situation” for premium store brands, which may improve their competitiveness against national brands. Said Bianca Grohmann, Concordia Research chair in marketing and study co-author, “Companies see increased profits, consumers get improved products, and the environment experiences better protection.”

Nielsen’s study from last fall, “The Sustainability Imperative,” similarly found that 66 percent of global respondents say they’re willing to pay more for products and services that come from companies that are committed to positive social and environmental impact, up from 55 percent in 2014 and 50 percent in 2013.

However, the Concordia University study found store brands with a lower price point did not benefit from the presence of ethical attributes aimed at enhancing social welfare or environmental protection.

Onur Bodur, Concordia marketing professor and the study’s lead author, said a higher price point signals a standard or premium quality tier positioning that is further strengthened by benefits associated with the ethical attribute (for example, a healthier product).

“These sorts of positive evaluations do not extend to low-priced store brands simply because ethical attributes aren’t seen to contribute to the economic benefit which arise from their purchase,” she said.

In fact, the reverse is true. When ethical attributes are eliminated from economy store brands, their perceived value increases. “Consumer evaluations are in line with this argument,” Ms. Bodur said.

DISCUSSION QUESTIONS:
Should ethical positioning be reserved for premium private label grocery brands rather than economy brands? Does it make sense that some brands gain a bigger price boost from ethical stances than other brands?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It’s up to brand management to communicate the value of the product to consumers. Once they do, consumers will start asking why sustainable equals higher prices, just as they challenge the higher cost of organics."
"Ethical positioning sounds like a trend, but it still comes down to price in many areas of our country."
"If consumers think your private label, of whatever stripe, is too low-price to be believable as a quality product, they won’t buy it."

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12 Comments on "Should lower-tier private labels avoid being ‘ethical’?"


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Dr. Stephen Needel
Guest
3 years 5 months ago

Start by recognizing that the Nielsen study is irrelevant — this is a classic case of the fact that what shoppers say and do are often two different things. If the green positioning isn’t doing anything for you, get rid of it. Yes it makes sense that some brands get a boost, but probably not much and probably not that many brands.

Max Goldberg
Guest
3 years 5 months ago

Ethical positioning should not be reserved for premium private label brands. It’s up to brand management to communicate the value of the product to consumers and, once they do, consumers will start asking why sustainable equals higher prices, just as they are now challenging the higher cost of organics.

Tony Orlando
Guest
3 years 5 months ago

Ethical positioning sounds like a trend, but it still comes down to price in many areas of our country. If a store or chain can produce a private label with all natural ingredients, then absolutely they should. I would love to be able to sell organic produce and organic meats, but the price differential is too far apart and, in our area, we would be throwing more away than we would sell.

Private label staples are becoming healthier every year as many manufacturers are producing better products that are priced lower than brand names, which will help everyone eat better and save money.

I’m working with a small producer of premium natural spaghetti sauce, BBQ sauce, salsas, and salad dressings that will have my own label on it, for about 25 percent less than premium labels, and that is something I will follow up on later.

As supply and demand increases for these items the prices should fall a bit and force premium labels to take notice, which again should help save the consumers even more money.

Ralph Jacobson
Guest
3 years 5 months ago

This is all a matter of knowing your audience. Period. Whether you are trying to determine the value of these “ethical” aspects of your products or any other aspects, you will know what adds value for the shopper if you leverage deep shopper insights from both internal and external data.

Does is surprise anyone that certain aspects associated with products drives a higher price point? It shouldn’t.

HY Louis
Guest
3 years 5 months ago

To consumers it might not make any sense. Why should they pay more to businesses that do the right thing? Businesses should do the right thing without asking for a bonus. After all, it’s only a claim or perception that certain businesses are more ethical or more protective of the environment. Perhaps there are a lot of lower-cost labels out there that are doing quite well ethically but we never hear about it because those companies either don’t boast about it or make a point to charge more. Everyone claims that ethics and sustainability are shopping priorities, however when you follow the money, price always wins out.

Joan Treistman
Guest
3 years 5 months ago

I totally agree with Stephen Needel’s conclusion about the incongruity of what consumers say and what they do. This was just another example of a poorly designed survey.

I’ll add that consumers have developed a filter when it comes to ethical positioning. “Ethical marketing associations mean higher prices. So what will I gain if I buy that particular product?”

It’s kind of like the filter that evolved for diet snacks. “Diet snacks means snacks that don’t taste good. So why would I want to buy food that I won’t like and therefore won’t eat?”

These filters guide consumers’ expectations of price value and product satisfaction. So it’s no surprise that economy brands with ethical positioning generate resistance, because their higher price tags are in increments disproportionately higher than premium brands. For consumers it’s too high a price to pay for some alleged benefit.

Dan Raftery
Guest
3 years 5 months ago

The main strategy for offering tiers of store brands is to appeal to a wide range of price sensitivities. Anything that results in even the perception that the lowest tier has unnecessary costs defeats that strategy.

Warren Thayer
Guest
3 years 5 months ago

If consumers think your private label, of whatever stripe, is too low-price to be believable as a quality product, they won’t buy it.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
3 years 5 months ago

I guess so, based on the research. It may be a case of cognitive dissonance, i.e., value is value and the consumer may want to accept it as “face value” with no added frills about ethical positioning. On the other hand, is it possible that the consumer perceives value items don’t have to also be “ethically desirable?”

Tina Lahti
Guest
Tina Lahti
3 years 5 months ago

If I perceive your private label is not ethically sourced I will think less of your company and may choose not to shop with you in the future. Not abusing workers or animals or destroying the planet are table stakes for younger shoppers.

David Livingston
Guest
3 years 5 months ago

Go to a Walmart a minute before midnight at the first of the month. You will realize what a bubble most professional type people live in. You will see those who have made a lifestyle choice of minimal ethics and then witness shopping choices with zero ethics.

The market for the ethically challenged is in the hundreds of billions. The market demand reserved for premium private label grocery brands is an illusion. That’s because they are sold at the stores in our bubble and demonstrated by gorgeous models at the trade shows we attend. Premium private label is just a drop in the bucket. Decisions made on price and ethical stances are minimal at best in the overall marketplace.

Carlos Arambula
Guest
3 years 5 months ago

Economy or private label brands are appealing precisely for their price point. Consumers who shop and buy them are considering price and quality, not corporate ethical behavior.

The moment the price increases to parity with a bigger brand — regardless of reason (including to support ethical or sustainable issues), consumers will choose the name brand.

While it’s important to recognize that Millennial and other consumers will pay more for brands with sustainable or ethical programs, it’s more important to know why and when they are willing to pay more.

wpDiscuz
Braintrust
"It’s up to brand management to communicate the value of the product to consumers. Once they do, consumers will start asking why sustainable equals higher prices, just as they challenge the higher cost of organics."
"Ethical positioning sounds like a trend, but it still comes down to price in many areas of our country."
"If consumers think your private label, of whatever stripe, is too low-price to be believable as a quality product, they won’t buy it."

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